You can equip this card to non-Machine-Type monsters on your opponent's side of field to prevent them from attacking; it is not usually advised to equip this on your own Monster Cards, despite occasional strategic benefit from this.
You can use this card to prevent your own monsters from attacking, like "Berserk Gorilla" or monsters affected by "Battle Mania".
Using "DNA Surgery" and declaring any Type other than Machine will allow you to "paralyze" Machine-Type monsters.
This card can be useful in a Deck revolving around "Power Tool Dragon". It can be used defensively by equipping it to an opponent's monster. At the same time, it can still be equipped to "Power Tool Dragon", which grants it an extra invincibility but since it is immune to the setback, it can still attack.
Note that "Paralyzing Potion" cannot stop monsters that can still activate effects as they can give you serious problems. For example, there are monsters that are fully immune to Spell Cards and that they can still attack you, as well as monsters that don't normally attack at all, yet can still inflict LP damage as a result of card effects, which can make "Paralyizing Potion" too much of a liability.
If this happens, have "Skill Drain" to ensure that all monsters (which also includes Link, Synchro, Pendulum and XYZ monsters) have their effects negated so you can use "Paralyzing Potion" against them easily.